President Obama believes the Trans-Pacific Partnership (TPP) will strengthen regional security in Asia as well as the U.S. economy, hedge against Chinese influence, and speed along economic reform in Japan. But experience has shown that grand assertions like these rarely hold up against the scrutiny of time.
And with Japanese Prime Minister Shinzo Abe’s state visit just around the corner, indicating a trade deal is close at hand, it’s worth exploring these claims in depth.
Let’s start with the purported economic benefits. The study cited often by proponents of the TPP (the “Petri” study) shows even under its rosiest scenario only nominal economic benefits for the U.S. economy – and that the U.S. manufacturing trade deficit will rise. But that study was concluded before the recent devaluation of the Japanese yen and the strengthening of the U.S. dollar, which is likely to widen American trade gaps even more.
The costs of trade agreements that sacrifice American manufacturing capacity are clear because we’re still living with them. The wave of U.S. factory closures that accelerated after NAFTA went into effect only sped up when China entered the World Trade Organization in 2001. We’ve lost more than 5 million manufacturing jobs since then, not to mention significant global export market share. Those trends would certainly continue under the TPP, given the currency gaps and structural issues left unaddressed in the proposed deal.
This offshoring has in turn had a direct effect on our national security. A shrinking defense industrial base ultimately means more dependence on imports and potentially dangerous gaps in our military’s domestic supply chain. But, similar to the TPP’s description as a mandatory complement to the Pentagon’s pivot to Asia, there were plenty of security promises made during the sale of NAFTA and China’s entry into the WTO. They have been conveniently forgotten by the TPP’s proponents, but provide important context for the claims being made in favor of today’s deal.
For instance, the effects of NAFTA accelerated – rather than reversed, as its advocates claimed it would – waves of drug-related violence and undocumented migration that still trouble the United States and Mexico today. China, meanwhile, is no more open politically nor appreciatively more cooperative on international matters than it was when it joined the WTO. In some ways, the economic strength China has derived from flaunting its international obligations has made it even more defiant. And in blunt terms, we didn’t just feed that beast—we stuffed its mouth full by championing its WTO ascension without establishing trade and currency rules with tougher terms and legitimate consequences.
Counterfactuals can be tricky, but I believe it would have saved a lot of American jobs if our negotiators and political leaders took the time to negotiate a more stringent set of rules in both of those historical instances. Yet we may be about to conclude a TPP that repeats those mistakes.
During Abe’s visit, Obama is expected spend a significant amount of time praising his counterpart’s reform plan as a necessary shot in the arm for one of the world’s largest economies, and will argue that the TPP will help to speed those reforms along. Yet one of the pillars of Abenomics appears to be an undervalued yen, which will only widen our bilateral trade balance and economic tensions between our countries. While enforceable objective criteria on market access and rules against currency manipulation would expedite these reforms, Abe and Obama appear to have rejected that approach.
That leaves us with the false choices TPP proponents have laid out: Support the agreement or turn your back on trade; oppose the agreement and turn your back on Asia by allowing China to write the rules.
But the real choice is about getting the rules right. China would welcome a TPP agreement that lacks currency disciplines, because it will permit mercantilists (like China) to continue exporting their unemployment problems to the United States. The TPP wouldn’t make Japan’s growth any less dependent on racking up a trade surplus with the United States, which would be a setback for the true goals of Abenomics.
On the eve of Abe’s state visit, there’s little hope the administration will stop making grandiose claims about things the TPP will never do. But we must insist they at least get the rules right. It will be American manufacturers, businesses, and workers who suffer if they don’t.
Paul is president of the Alliance for American Manufacturing, a non-profit, non-partisan partnership formed in 2007 by some of America's leading manufacturers and the United Steelworkers.